In today’s briefing:
- S&P Global Water Index: Market Consultation Driven Potential Changes
- Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
- Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term
- MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
- Selected European Holdcos and DLCs: July ‘22 Report
- Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea
- Tencent Looking to Raise Its Stake in Ubisoft at a Huge Premium
- NHN: Cancellation of Treasury Shares Equivalent to 10% of Outstanding Shares Over Next 3 Years
S&P Global Water Index: Market Consultation Driven Potential Changes
- S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
- We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
- There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.
Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
- Just days after AMTD Digital (HKD US) was ramped 30,000% to a ridiculous valuation only weeks after its IPO, Magic Empire Global (MEGL US) IPOed and rose 2000+ on Day1.
- MEGL is a corporate advisory, helping smallcaps IPO then helping them comply with listing rules. 2 principals, 2 professionals, 5 staff with no moat had US$2.16mm in revenue in 2021.
- And it is worth US$2.3bn – 1000 x revenues and 10,000x earnings? This is not OK. And it smacks of something unsavoury.
Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term
- Nexon (3659 JP) reported Q2 earnings and Q3 forecasts today. Everything is generally “in-line” to tilting slightly light. But USD/yen volatility matters a lot.
- The company announced a small dividend hike, from largely meaningless to ever-so-slightly less meaningless. And a plan to buy back ¥100bn of shares over 3 years.
- The inheritance tax issue remains a big one, but overhang appears delayed and buyback accretion is small, and also appears delated. And there’s an index sell at end-September.
MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
- We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals.
- The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom.
- The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom).
Selected European Holdcos and DLCs: July ‘22 Report
- Discounts to NAV of covered holdcos haven’t shown a clear trend during July/beginning of August. Investors have favored Swedish hodlcos, disliked GBL’s results and avoided the Heineken/Heineken Holdings trade.
- Discounts to NAV: Alba, 42.8%; GBL, 34.5%; Heineken Holdings to 21.5%; Industrivärden C, 7.8%; Investor B, 14.3%; Porsche Automobile Holding to 29.4%. Rio Tinto DLC tightened to 16.2%.
- Spreads tend to widen in bear markets but short term recoveries provide opportunities on tightening discounts. If anything, recommended trades are: Industrivärden C vs. listed assets, Porsche, Rio Tinto (DLC).
Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea
- The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.
- The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).
- This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.
Tencent Looking to Raise Its Stake in Ubisoft at a Huge Premium
- Reuters and several other news media outlets reported that Tencent (700 HK) is looking to raise its stake in French game publisher Ubisoft as it seeks to expand overseas.
- Tencent owns approx. 5.0% of Ubisoft which was acquired in 2018 and is said to have reached out to the founding family Guillemot to buy a stake from their ownership.
- As we mentioned in our previous insight, Tencent has been excluded for the fourth time from new game approvals which had impacted its online games biz.
NHN: Cancellation of Treasury Shares Equivalent to 10% of Outstanding Shares Over Next 3 Years
- After the market close on 9 August, NHN Corp announced that it will cancel treasury shares equivalent to 10% of outstanding shares in the next three years.
- This is a tremendous management move to improve shareholder return policy.
- A 10% share cancellation of outstanding shares is a major move and this is likely to result in a sharp appreciation of NHN’s share price in the next several weeks.
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